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2023 (4) TMI 536 - AT - Income TaxAddition u/s 68 - unexplained loan/advances - huge increase in loan/advances from related parties - AO concluded that assessee had introduced his unaccounted money in the garb of loan from share holders and relatives of share holders and from whom the assessee can get confirmation or any other documents as per his convenience - CIT-A deleted the addition - HELD THAT - Apparently, during the assessment proceedings or during the remand proceedings the learned AO has not made any attempt to exercise his powers of inquiry from jeweler or from other available open sources to establish any suspicion. AO has stressed on his belief that the assessee was under an obligation to explain the source and occasion of jewellery purchased and received by these nine parties. Bench is of considered opinion that learned CIT(Appeals) has taken a more prudent approach by observing that AO has not questioned the sale transactions. As such he has merely added the LTCG amount earned by respective parties on the jewellery sold. It is also coming up that these parties in fact had transactions earlier and they were old depositors of the assessee who had received further deposits during the previous year. CIT(Appeals) has also made a valid observation that there was no legal mandate for them to furnish wealth-tax returns. For the purpose of Section 68 of the Act, the assessee had brought sufficient explanation of the source of deposits. Circumstances how so ever strong, the same can never take the place of proof, upon the discharge of the burden, with what so ever probabilities. The findings of CIT(Appeals) require no interference. - Decided against revenue.
Issues involved:
The judgment involves the appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals) regarding the addition of unexplained loan/advances made by the assessee, focusing on the assessment year 2013-14 under section 143(3) of the Income-tax Act, 1961. Details of the Judgment: 1. Facts and Conclusions by AO: The assessee, engaged in manufacturing and supplying, faced scrutiny due to a significant increase in loan/advances from related parties. The AO raised queries regarding the source of funds, specifically related to old jewellery sold by depositors, relatives, or shareholders. The AO concluded that the assessee introduced unaccounted money as a loan from closely connected parties, leading to an addition of Rs. 3,50,50,852. 2. Decision of First Appellate Authority: The First Appellate Authority partially allowed the appeal, deleting Rs. 3,48,00,852 of the addition and sustaining Rs. 2,50,000. This decision prompted the Revenue to appeal, challenging the deletion of the major portion of the addition. 3. Revenue's Grounds for Appeal: The Revenue raised grounds questioning the deletion of the substantial addition, emphasizing the failure to prove the loans/advances' genuineness and creditworthiness of depositors. The appeal highlighted discrepancies in the assessee's explanation and the need for the AO to consider circumstantial evidence. 4. Arguments and Analysis: During the hearing, the Senior DR argued for considering circumstantial evidence, while the AR contended that all relevant information was provided. The Bench analyzed the evidence and observed that the AO failed to question the sale transactions of jewellery, focusing solely on LTCG amounts. The CIT(A) took a prudent approach, noting the absence of a legal mandate for wealth-tax returns from the depositors. 5. Specific Case Analysis: Regarding specific depositors like Nitasha Singhal and Nishit Singhal, discrepancies in the AO's findings were highlighted. The CIT(A) established that the sources of funds were explained, such as sale of jewellery, rent received, and gifts, reducing the additions based on detailed account entries and supporting documents. 6. Final Decision: The Bench concluded that the assessee provided sufficient explanation for the deposits under Section 68 of the Act. Despite strong circumstances, proof remains essential, and the CIT(A)'s findings were upheld. The Revenue's grounds lacked substance, leading to the dismissal of the appeal. This judgment showcases the importance of substantiating financial transactions and the burden of proof in tax assessments, ultimately emphasizing the need for thorough examination and documentation to support claims and avoid unwarranted additions.
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